Question

indifference curve at starting point are​

Answer 1

Answer:

Indifference curves

Introduction

The origins of indifference analysis can be traced back to the work of late 19th Century Irish economist Francis Edgeworth, and later, to Italian economist Vilfredo Pareto.

The starting point for indifference analysis is to identify possible baskets of goods and services which yield the same utility (usefulness, or satisfaction) to consumers.

It is assumed that individuals, faced with a budget constraint, will choose the basket that maximises their total utility – in other words, they will act rationally when allocating their budget.  The search to identify bundles of goods and services that yielded the same utility marked a significant point in the development of consumer theory as indifference analysis does not require the direct measurement of utility for a single good. Indifference analysis, therefore, provided a solution to the long-standing problem of how to measure utility.

Cardinal and ordinal utility

In indifference analysis, it is not necessary to establish an objective and observable measure of utility (referred to as cardinal utility), but simply to identify those baskets of goods and services that consumers are indifferent to, and are equally preferred. Indifference analysis only requires that we rank consumer’s relative preferences and, thereby, establish an order of preference, referred to as ordinal utility.

Explanation: